Wealth, Housing and Retail Show How Canada’s Economy Is Healing
(Bloomberg) -- A year into the pandemic, Canada’s economy is showing clear signs it’s on a path to a full recovery.
The country added 259,200 jobs in February, more than three times what economists were expecting, Statistics Canada reported Friday. That follows other data this month indicating Canada’s economy is on pace to fully repair damage from the pandemic at least one year ahead of what most analysts were expecting only weeks ago.
And that’s despite lockdowns that closed large parts of the economy in December and January. In just two months, the policy debate has turned from whether to provide additional stimulus, to when to pull back on support.
Here are some highlights, 12 months after the first Covid-19 restrictions were imposed.
In the midst of a deep economic crisis, Canadians became a whole lot richer.
The nation’s households saw their net worth jump by more than C$1 trillion ($800 billion) last year, according to a separate report Friday from the statistics agency. That’s despite a downturn that saw 3 million people lose jobs and the unemployment rate jump to historic highs.
Generous government income support during the pandemic, along with fewer opportunities to spend, resulted in stronger household balance sheets. Low borrowing costs encouraged Canadians to buy properties. Others decided to put money into stocks or other assets.
On a per capita basis, household net worth reached a record C$332,000, up about C$24,000 since the end of 2019.
The value of homes and land owned by households, which grew by C$642 billion last year, was the main contributor to that boost in wealth.
It was a strange year for real estate. Some saw the pandemic as the trigger for a major correction. Instead, the residential real estate market has been a bright spot in Canada’s recovery story, with sales and prices for single-family homes reaching records in many metro areas as consumers search for more space and take advantage of low borrowing costs.
To economist David Rosenberg, things have gone too far.
“This might be one of the biggest bubbles of all time,” the founder of Rosenberg Research & Associates in Toronto told BNN Bloomberg Television on Wednesday.
While almost 1 million Canadians are still gravely impacted from the pandemic -- either through lost jobs or substantially fewer hours -- the nation’s labor market has recovered most of its losses. At its worst point, 5 million Canadians had lost jobs or were working less than half their usual hours, one-quarter of the labor force.
The lingering damage is increasingly confined to a subgroup of largely high-contact sectors: accommodation and food, retail and recreation. These are largely lower-wage workers, disproportionately young and female.
It’s a double whammy for some of these groups. Lower-waged workers are more likely to be renters rather than homeowners. Not only are their chances of being unemployed higher, they also haven’t benefited from the rise in home prices.
Consumption did drop last year, but the data also show households -- with confidence back at pre-pandemic levels -- were spending money when they were allowed to shop. Consumption on services like haircuts fell by C$66 billion last year, while travel expenditures were down more than C$30 billion. But anything to do with housing was a blockbuster year, while spending on durable good items was down just C$4 billion in 2020.
Another case in point was retail. Most retailing sub-sectors returned to pre-pandemic levels of sales and some have more than offset losses early on in the crisis.
In aggregate, Canadian retailers recorded a 1.4% drop in sales to C$606 billion last year but that was because of a collapse in April and obscures a surge since then. In December, sales were up 4.5% from year earlier levels.
Yet the uneven nature of the rebound is evident here as well. Grocery stores and building material retailers posted double-digit annual growth. Clothiers, meanwhile, reported double-digit declines.
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